Looking to improve your financial literacy? start here

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Over the past couple of years, as the pandemic has impacted every aspect of society, Americans have shifted their behaviors and attitudes around money a bit. In the beginning, there was a tightening of the belt and a reliance on stimulus checks, improved unemployment benefits, etc.

This gave way to revenge spending and YOLO, or “you only live once” attitudes.

Now, with the pandemic winding down and a more normal economic backdrop in place, more Americans could get back to basics, such as a possible new focus on saving and improving their financial knowledge or literacy. .

A new survey from Fidelity Investments suggests it may have already started, with many people acknowledging that they are still not doing the right thing with their money and admitting that they still lack financial knowledge.

For example, of the more than 2,500 respondents who are currently investing or saving, 51% said they were not saving as much as they would like, with 31% attributing this to a lack of investment knowledge. And many more people are still not saving or investing at all, with just two in five respondents in a Bankrate.com survey saying they have enough money to cover an unexpected $1,000 expense.

In the Fidelity survey, budgeting/savings, inflation, and retirement accounts are among the top topics Americans consider important for managing their finances.

Financial literacy has always been difficult to master for many people struggling with budgets, credit scores, debts, taxes, and other issues. Increased stock market volatility of late, rising inflation and other trends have also revealed a need for financial education, said Roberta King, vice president of Fidelity Investments.

The study also found that people who work with an advisor adopt better financial habits, such as prioritizing long-term goals. Yet many advisors don’t deal much with the people who need them the most — first-timers and those who live paycheck to paycheck.

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Karen Tucker takes notes during a financial investment course hosted by the Kroc Center and the Salvation Army in South Phoenix on Wednesday, March 9, 2022 in Phoenix.  The course is part of a 10 week financial literacy course.

In-person assistance increases knowledge

Karen Tucker strives to improve her financial knowledge. She took a series of free financial literacy classes sponsored by the Salvation Army at its Ray and Joan Kroc Center in South Phoenix. Tucker, an Ahwatukee resident, said she was trying to prepare for retirement while living with two children at home.

“I need to be able to teach them financial literacy, and I need more information for that,” she said, citing in particular budgeting, spending decisions and debt repayment.

“It’s about being responsible for the money, down to what you spend on coffee every day,” Tucker said. “When you can take care of yourself, you’ll feel better.”

Kyli Alvarez, a Tolleson resident who recently graduated from college but still lives at home while working part-time, said she wants to learn how to pay off student loans, manage credit cards and prepare to live alone.

Like many people, “I didn’t learn much in college,” said Alvarez, who also took the classes.

Try to generate interest

Phalen Booker, an Edward Jones advisor in Scottsdale who recently taught a course, covered a variety of topics, including assets and liabilities, investment basics, some insurance fundamentals, the importance pay bills and establish a good credit rating. That’s a lot of ground to cover in an hour.

“I’m just trying to give them a base that hopefully piques their interest,” he said. “It’s more like a skeleton; I let them put the meat on the bones.

Booker said he, too, was a late start to learning about personal finance. “Money was not discussed in our house,” he said. “It was almost taboo.”

He suggested other reading for students, citing favorite books on personal finance, including “The Total Money Makeover” by Dave Ramsey, “Rich Dad Poor Dad” by Robert Kiyosaki, “Unshakeable: Your Financial Freedom Playbook” by Tony Robbins and “The Millionaire Next Door”. by Thomas Stanley and William Danko.

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Much more to learn

One of the ongoing challenges of financial literacy is that the topics continue to grow in number and complexity. For decades, many types of investments, bank accounts, borrowing options, homeownership advice and more were available.

Now there are cryptocurrencies, NTFs or non-fungible tokens, credit scoring complexities, more workplace retirement benefits, health plan complications, threats of identity theft and an ever-expanding federal tax code.

One point Booker emphasized was to learn the basics, especially for beginners, and to avoid investing in areas you are unfamiliar with.

“You could accumulate so much more if you were a little more diligent, invested a little more, and had a better idea of ​​what you’re investing in,” he said.

Another difficulty is that financial education often falls on deaf ears unless people have skin in the game. In other words, if you don’t have enough money to invest, you probably don’t care whether value or growth stocks might be the better bet right now.

Fewer “feel good” purchases

When it comes to people who are already active investors, the majority of respondents in the Fidelity study express more of a conservative lean, although this may also reflect a tougher stock market climate so far in 2022. For example, more respondents said they favored long-term gains over short-term trades and focusing more on low-risk, low-return investments.

Many respondents also said they try to build an emergency fund rather than spending money on things like travel, and they try to save more for retirement rather than “feel good” purchases.

A big part starts with budgeting – learning to limit spending below your income. Once you can build up excess cash, you can set up that emergency fund to deal with unexpected expenses without resorting to credit cards or other short-term loans. Eventually, you can start investing for long-term goals like retirement planning.

Now is a good time of year to build an emergency fund. Tax refunds, the biggest amount of money many people will see all year, are a catalyst.

Individual tax refunds averaged around $3,400 through early March, and 46% of respondents to a recent LendingTree survey said they planned to save their refunds, compared to 41% last year. Most of the others planned to use their repayments to pay off their debts.

Contact the reporter at [email protected]

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